EIOPA s conduct of business strategy and outlook in the area of consumer protection. 2 nd European Congress of Actuaries Brussels, April 2016

Transcription

1 EIOPA s conduct of business strategy and outlook in the area of consumer protection 2 nd European Congress of Actuaries Brussels, April 2016

2 Overview Background, conduct of business strategy and consumer protection cycle Outlook focusing in particular on files of particular interest to actuaries: - Retail risk indicators; and - Digitalisation and big data 2

3 Protecting consumers Prudential dimension Conduct dimension Goal Sound regulation and supervision of insurance undertakings Sound regulation and supervision of the conduct of business of insurance undertakings and insurance intermediaries Transparent insurance products that meet consumer needs and that are understood by consumers 3

4 EIOPA strategic approach to consumer protection EIOPA Regulation: Transparency, Simplicity, Fairness EIOPA s Strategy 2 towards a comprehensive risk-based and preventive framework for conduct of business supervision PRIIPs 1 : Key Information Documents (KIDs) for packaged retail and insurancebased investment products IDD: New directive on insurance distribution, 3 replacing the pre-existing IMD (2002) COM s Green Paper on Retail Financial Services incl. topic of digitalisation 1 Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs), Regulation (EU) 1286/ Insurance Distribution Directive, Directive (EU) 2016/97 4

5 Key elements of consumer protection cycle Resolution Monitoring Complaints Thematic reviews on market conduct Subject to political developments: Insurance Guarantee Schemes Design / transparency Product Oversight & Governance Arrangements (within IDD) Distribution IDD delegated acts on IBIPs: Conflicts of Interest, Inducements, Execution-Only sales EIOPA Complaints Handling Guidelines Consumer Trends Report Retail risk indicators (see separate slide) Market monitoring by EIOPA and Product Intervention Powers PID for non-life KID for IBIPs 5

6 Outlook: Retail risk indicators Commission rates High commission level may lead to misleading and aggressive selling practices. Combined Ratio (non-life) A combined ratio below 100% indicates that the undertaking is obtaining profits. High profits may indicate products which offer poor value to consumers or high incentives for inappropriate sales or marketing behaviours. Cons. protection importance: medium Consumer protection importance: high Claims Ratio (non-life) Very low levels of claims ratios during an extended period of time may indicate value-for-money or conduct issues. Low claims ratios may suggest high volumes of refused claims, which may indicate mis-selling or bad wording of the product. Consumer protection importance: high Lapse Ratio (life) High levels of lapses, especially early lapses, may indicate poor product design or high pressure sales. Consumer protection importance: high 6

7 Outlook: Digitalisation & big data Addresses information asymmetry/transparency Empowerment Better customer experience Personalised products based on own behaviour Opportunities for consumers Challenges for consumers Data protection issues? Exclusion Pre-ticked boxes approach Non-digital population left behind Behavioural economics: information overload? Enhanced risk management via new types of real-time algorithmic data ( 5V ) Targeted and individualised policies Enhanced transparency and competition Innovation Reduced distribution costs Opportunities for industry Challenges for industry Solidarity model to be re-thought? Risk of concentration Revamping existing distribution channels Cyber risk New types of risk like possible liability for driver-less cars 7

8 Thank you; questions? Katja Wϋrtz Head of Cross-sectoral and Consumer Protection Unit, EIOPA